Dissolving Fannie Mae, Freddie Mac may hurt borrowers
Source: The LA Times
What will the proposed elimination of Fannie Mae and Freddie Mac mean for consumers? In the absence of a government guarantee, experts contend that mortgage rates are likely to rise, and the widespread availability of 30-year mortgages would be jeopardized. Economists at Moody’s Analytics estimate the average mortgage borrower would see interest rates increase by one-half to three-quarters of a percentage point.
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Consumer Watchdog says mortgage servicing still riddled with problems
Source: The Washington Post
Error-prone and even abusive practices still plague the mortgage servicing business, according to a new report from the Consumer Financial Protection Bureau (CFPB). The report indicates that servicers have made a variety of mistakes, including sloppy payment processing, poor communications with consumers, and insufficient programs to ensure compliance with federal laws. Under the 2010 Dodd-Frank law, the CFPB is tasked with oversight of consumer products, including mortgages and credit cards, due to issues that stemmed from the 2007-2009 financial crisis.
Making sense of the story
- The CFPB has launched investigations into the conduct of banks and other financial firms since many companies continue to violate the terms of the 2012 National Mortgage Settlement.
- In some instances, homeowners faced extra fees due to the sloppy payment processing of mortgage servicers. Also, some homeowners were not notified that their loans were transferred to another company.
- Non-bank servicing firms, which are now subject to examinations, reportedly lack formal procedures to address consumer complaints or ensure quality control. The report shows an absence of systems for compliance management.
- “Deceptive communications to borrowers” about modification requests remains an issue, and services failed to help struggling homeowners find more manageable repayment plans where possible. Applications for loan modifications also took too long to process.
- New mortgage servicing standards are set to take effect in January 2014 to force servicers to give homeowners easy access to information about their loans, among other things. The CFPB issued the new standards to promote greater transparency.
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FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure
The FHA is reducing the amount of time a borrower must wait in order to receive an FHA-insured mortgage, according to a new mortgagee letter from the Dept. of Housing and Urban Development. Currently set at three years, the FHA now allows eligible borrowers to receive an FHA-insured loan in as little as one year. Eligible borrowers include those who experienced unemployment or other severe reduction in income and were unable to make their monthly payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure.
FHA is allowing for the consideration of borrowers who have experienced an economic event and can document that:
- Certain credit impairments were the result of a loss of employment or a significant loss of Household Income beyond the borrower’s control;
- The borrower has demonstrated full recovery from the event; and,
- The borrower has completed housing counseling.
The guidance in the mortgagee letter is applicable to purchase money mortgages in all FHA programs, with the exception of Home Equity Conversion Mortgages.
Borrowers who may be otherwise ineligible for an FHA-insured mortgage due to FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage if the borrower:
- Can document that the delinquencies and/or indications of derogatory credit are the result of an economic event as defined in the mortgagee letter,
- Has completed satisfactory housing counseling, as described in this ML, and
- Meets all other HUD requirements.
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Housing inventory crunch seems to be easing up
Source: The LA Times
A new report from Realtor.com indicates that the number of listings rose 1.4 percent from June, which is the fifth consecutive monthly rise. In comparison with last year, the number of homes listed for sale has started to increase in some markets. Read the full story
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Tax-Free Accounts for Homes
Source: The New York Times
A coalition led by Smart Growth America of Washington is calling for policy that would allow Americans to have a tax-exempt account to save for the down payment on a mortgage, just like tax-free savings accounts for health care and college tuition. Proponents suggest it would encourage Americans to start saving earlier for a down payment and closing costs. Pretax contributions could be made to such an account for up to 10 years.
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Should Home Sellers Overprice or Underprice Real-Estate Listings?
Source: The Wall Street Journal
When setting an asking price, there are two major strategic approaches: overpricing when inventory is low to get higher initial offers, or pricing homes below nearby properties to instigate a bidding war in a market with pent-up demand. But what’s the best method? New research on a behavioral trait called “anchoring” sheds some light on the power of price. Read the full story
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The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California dropped to 36 percent in the second quarter of 2013, down from 44 percent in first-quarter 2013 and from 51 percent in second-quarter 2012, according to C.A.R.’s Traditional Housing Affordability Index (HAI). The second quarter 2013 figure fell below 40 percent for the first time since the third quarter of 2008.
Nearly all regions of the state experienced sharp quarter-over-quarter declines in housing affordability, with Bay Area and coastal regions recording the greatest decreases in the index due to significantly higher home prices.
At an index of 71 percent, Madera County was the most affordable county of the state, while San Francisco and San Mateo counties tied for the least affordable at 17 percent.
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Realtor.com announced the results of its Back to School survey, which looks at the impact school boundaries have on buyers looking to purchase a home within two years. Realtor.com® found that three out of five home buyers surveyed said school boundaries will impact their home purchasing decision.
A majority of home buyers who said school boundaries will have an impact are willing to pay 1 percent to 10 percent above budget to live within school boundaries. Of those surveyed, 91 percent said school boundaries are “important” or “somewhat important,” while only 7.43 percent said school boundaries are “unimportant” or “very unimportant.”
Home buyers who said school boundaries will have an impact on their decision also indicated that they would give up several amenities to live within school boundaries of choice:
- 62 percent would do without a pool or spa
- 51 percent would give up accessibility to shopping
- 44 percent would pass on a bonus room
- 42 percent would offer up nearby parks and trails
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CA BRE # 01929144
Asking Mom and Dad for Cash to buy that Home
Source: Wall Street Journal
Loans from family members could go the extra mile in making a down payment, but financial experts say parental help is most useful when it comes as a gift rather than a loan during the mortgage application process. A family loan may not be viewed favorably by a lender and could lead to disqualification for a mortgage since the loan is considered unsecured debt. Read the full story.
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